A new wave of Asian overseas expansion?
This week CemNet reported on the announcement that Taiwan Cement is creating a new subsidiary, Dutch TCC Holdings, investing up to US$1.1bn in the new company. Dutch TCC Holdings is expected to enter a joint venture in Turkey with Ordu Yardimlasma Kurmu (Oyak) Holding, which will hold a 60 per cent share, while Dutch TTC Holdings will account for the balance of shares.
TCC has acquired 40 per cent fo the shares of Oyak Çimento for a total value of US$640m. Oyak is reported to be willing to make Taiwan Cement its key business partner to grow its presence in Turkey. Taiwan Cement Vice President, Edward Huang, said Taiwan Cement will use the strategic partnership with Oyak to conduct acquisitions and form more business alliances in Turkey in a bid to serve as a dominant power in the domestic cement market.
"Our companies (Oyak and Taiwan Cement) share similar and aligned goals," said Mr Huang. "Negotiations would be focussed on finalising the joint venture’s shareholder structure."
This joint venture is part of what many analysts are considering a new phase in the consolidation process, as Asian producers, particularly with operations in the Chinese market, are looking to enter new overseas markets and expand production facilities with the profits they have accumulated. This could be considered as part of the wider 'Silk Road' expansion drive. In Taiwan Cement's case, this opportunity may be used as "a springboard to access further markets in the Middle East, Eastern Europe and Africa," said Taiwan Cement Vice President, Edward Huang.
A key incentive for Taiwan Cement will be the strategic access to international export markets and Western Europe via Oyak’s Turkish network of facilities plus its recent acquisition of Cimpor assets in Portugal (see below).
Taiwan Cement is not only a leading player in Taiwan, with cement plants in Hualien, Heping and Su'ao, but also the sixth-largest cement producer in China, where it controls 75Mta capacity located in the Chinese provinces of Guangding, Guangxi, Jiangsu, Liaoning, Sichuan, Chongqing, Yunnan, Anhui and Fujian.
Chinese profitability promoting expansion
Growing profitability among large Chinese cement producers, encouraged by the Chinese government's twin policies of domestic industry consolidation and overseas expansion, is providing favourable conditions for Chinese producers to seek new opportunities.
LafargeHolcim already announced this week that China remains the biggest contributor to the group’s earnings growth in 3Q18, where price rises have been pushed through. The group's Huaxin joint venture added CHF82m (US$1.8m) or 3.5 per cent of the group's 8.1 per cent growth in 3Q18 on like-for-like EBIDTA.
However, the Chinese market is saturated and a cooling off period can be expected. Taiwan Cement's desire to move into a wider international footprint is likely to be echoed by further Asian cement producers in the future.
Oyak acquires Cimpor's Portuguese and Cape Verde assets
In a separate but related development Oyak is acquiring InterCement's Cimpor cement and concrete operations in Portugal and Cape Verde, European assets that are able to serve as a global stepping stone for the Turkey-based company. The divestment by InterCement will help the Brazilian multinational pay down short-term debt and other loans.
With the addition of the Portuguese facilities of InterCement, which have a combined capacity of 9.1Mta, Oyak will have an important foothold in western Europe to add to the 12Mt of cement production it already operates in Turkey. The Oyak group includes domestic production at six plants: Adana Cement, Unye Cement, Bolu Cement, Mardin Cement, Aslan Cement and Denizli Cement and has a market share of approximately 16 per cent. Oyak has 13 clinker lines and 45 ready-mix plants across Turkey and is the largest professional pension fund in the country.
